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Michigan patent office nixed for now as result of budget cuts

Looks like Michigan will have to wait a while longer to be a part of patent law history.

And it looks like patent law attorneys will have to keep waiting, period.

On Thursday, David Kappos, director of the U.S. Patent and Trademark Office (USPTO), announced that congressional budget cuts have forced the agency to table plans for a Detroit satellite office, along with considerations of any other satellite offices.

“In view of the funding cuts reflected in the final budget and affecting the U.S. government as a whole,” he said in a memo to USPTO employees, “we will be unable to expend the additional $85-$100 million in fees that we will be collecting during this fiscal year — funds that we had anticipated being able to use to fund operations this year.”

Postponing the opening of the Detroit office — which was scheduled for August and would have had 100 examiners — puts a damper on a positive thing happening for Michigan and the Midwest tech hub, said Charles A. Bieneman of Rader, Fishman & Grauer PLLC.

But the real hardship, he said, was Kappos’ announcement that, as part of the budget cuts, existing patent examiners won’t be paid overtime, and that there would be a hiring freeze.

“What that means,” he said, “is that fewer applications are going to be examined, the backlog [of 700,000-plus filed patent applications] is going to continue to grow, and the general slowness in resolving patent applications is going to continue and increase.”

Bieneman noted that there have been hiring freezes before — when he was a patent examiner, he got in just before such a freeze — and they come and go.

But he added that he speculates whether Kappos is trying to call someone’s bluff with his Thursday announcement.

“The whole issue of the PTO’s budget has always been a political hot potato,” Bieneman said, “because they’re a fee-funded agency, meaning that they’ve historically generated more revenue than they’ve budgeted to expend, because Congress has practiced what’s called ‘fee diversion.’”

How so?

“They basically skim some fees off the top,” he said, “and in the patent bar, it ticks people off, because we’re paying all this money to have our patent applications examined, and then it’s not even going to fund that. … The $100 million taken out of the PTO’s budget, it’s not like it’s tax revenue allocated to the PTO. Those are fee revenues — money the PTO has generated that Congress has taken away.

“It’s like if you’re a business and you want to pour your money into research and development, and they’re saying, ‘No, sorry, you’ve got to give that money to some other business.’”

That’s been business as usual, said Anna M. Budde of Harness, Dickey & Pierce, PLC in Troy. She noted that, according to the Intellectual Property Owners Association, since 1990, more than $800 million in USPTO user fees have been withheld from the agency — “dollars that could otherwise be spent on improving patent and trademark examination and reducing patent pendency.”

The USPTO had been making efforts over the last few years via pilot programs to tackle the backlog, such as:

• Allowing applicants to accelerate the examination of applications pertaining to green technologies;

• Having patent offices in select countries use findings for a patent application from another country’s patent office to speed the process; and

• Having inventors abandon one application in exchange for another application being advanced out of turn.

The USPTO’s Three-Track System, which would have let applicants have their applications processed as “prioritized examination” for a $4,000 fee, was to have started on May 4. In Kappos’ announcement, he said that that, too, has been postponed.

Naturally, this isn’t the kind of news patent law attorneys would have wanted to hear as they head into Easter weekend.

(If you would like to comment on this story, contact Douglas J. Levy at (248) 865-3107 or email douglas.levy@mi.lawyersweekly.com.)